Violent clashes in Washington left no trace in markets on Thursday, with equities pushing higher and bonds holding steady.
Futures contracts on the S&P 500 suggest the blue-chip index will open 0.6 per cent higher when Wall Street opens later. The benchmark gained ground on Wednesday, after Democratic victories in Georgia’s run-off elections gave the party control of the US Senate, paving the way for large-scale spending plans. The tech-focused Nasdaq 100 index was poised to add 0.8 per cent.
On Wednesday, angry mobs of Donald Trump supporters interrupted Congress’s certification of Joe Biden’s election victory, forcing legislators to abandon the US Capitol building before reconvening in the evening.
“I don’t know what was more astonishing, the scenes on my TV or the fact that equities weren’t heading south,” said Dickie Hodges, a bond fund manager at Nomura Asset Management.
“But it just shows you the sheer weight of money coming into markets, and the fact that everyone is focused on this optimistic narrative,” he added. “No one was actually willing to press the panic button.”
Investors remained focused on Mr Biden’s spending plans, after Democrats took control of both houses of Congress in what has been called a “blue wave”.
The sweep of the legislature “has really increased the appetite for risk”, said Natasha Ebtehadj, portfolio manager at Columbia Threadneedle. Equity markets were pricing in better corporate earnings due to the expected economic boost from further fiscal measures, she added.
Mr Biden is expected to expand a $900bn economic stimulus agreed by US lawmakers to help the economy through the coronavirus pandemic, and push for extra spending on infrastructure, clean energy and education.
In European, the continent-wide Stoxx 600 and the Xetra Dax in Germany were both up 0.3 per cent at lunchtime. The UK’s FTSE 100 index fell 0.5 per cent, having risen more than 3 per cent on Wednesday.
“The markets are looking through these dramatic events,” said Andrea Iannelli, investment director at Fidelity International, of the scenes on Capitol Hill. “The assumption is that democratic processes are holding up and that a transition is going to take place.”
The prospect of more stimulus has prompted investors to bet on the Biden administration generating not only economic growth but also inflation. The yields on US government bonds — which this week breached 1 per cent for the first time since the start of the coronavirus crisis — were steady at 1.04 per cent.
Didier St George, managing director of French fund manager Carmignac said: “Markets have been given this quite impressive cocktail of good news about [coronavirus] vaccines, the idea that there will be more fiscal stimulus and continued support from central banks.”
But this bright outlook was “quite extreme”, he added, and ran the “risk that markets are running ahead of themselves”.
In another sign investors were looking beyond the attempted threat to the peaceful transfer of power in Washington, the price of gold — a commonly used haven asset — was steady at $1,917.
The dollar, as measured against a basket of currencies, rose 0.4 per cent. It remains at its lowest level since April 2018, having been suppressed by ultra-loose monetary policy since the coronavirus crisis began.
Brent crude, the international oil benchmark, was 0.15 per cent lower at just above $54 a barrel.